The Market Reaction To Stock Splits — Evidence From India
Stock splits are a relatively new phenomenon in the Indian context. This paper examines the market effect of stock splits on stock price, return, volatility, and trading volume around the split ex-dates for a sample of stock splits undertaken in the Indian stock market over the period 1999–2005.The traditional view of stock splits as cosmetic transactions that simply divide the same pie into more slices is inconsistent with the significant wealth effect associated with the announcement of a stock split. However, the empirical evidence confirms a negative effect on price and return of stock splits. The overall cumulative abnormal returns after the split are negative. These results suggest that stock splits have induced the market to revise its optimistic valuation about future firm performance, rejecting signaling hypothesis to which splits convey positive information to markets. Hence, stock splits have reduced the wealth of the shareholders. The results also show that presence of a positive effect on volatility and trading volume following the split events, thus suggesting that split events enhance liquidity.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 10 (2007)
Issue (Month): 02 ()
|Contact details of provider:|| Web page: http://www.worldscinet.com/ijtaf/ijtaf.shtml|
|Order Information:|| Email: |
When requesting a correction, please mention this item's handle: RePEc:wsi:ijtafx:v:10:y:2007:i:02:p:251-271. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tai Tone Lim)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.